Fiscal autonomy of panchayats

The Panchyati Raj Institution (PRI) is a unique power-sharing governance model that seeks to strengthen democracy at the grassroots level through robust participation of people in this three-tier institution of local self-governance. The institution took stronger ground after the 73rd amendment to the constitution in 1992, which mandated a uniform structure across states, except in tribal autonomous council areas, comprising the gaon panchyats at the base level in villages, anchalik panchyats at the intermediate level and zila parishads at the district level. The constitutional amendment also led to the authorisation of the state government to devolve powers to panchayats, enabling them to prepare and implement plans for economic development at all three levels. The bottom-up approach to planning requires effective coordination among the three tiers of PRIs to prevent overlapping functions. The observation made by the Parliamentary Standing Committee on Rural Development and Panchyati Raj, in a report, regarding the concentration of powers at the gaon panchayat level and the relatively limited powers available to intermediate and district panchayats highlights a worrying deviation from the objectives of the constitutional amendment that needs to be corrected. The parliamentary panel insists that the constitutional framework envisages a bottom-up planning process through Gram Panchayat Development Plans (GPDP), Block Panchayat Development Plans (BPDP), and District Panchayat Development Plans (DPDP), and, therefore, concentration of power at the GP level adversely affects integrated planning and convergence. The Ministry of Panchayati Raj (MoPR) is formulating guidelines, as recommended by the Committee, to address these structural imbalances and enforce a coordinated, tiered approach to planning, where the BPDP and DPDP systematically consolidate development gaps ascertained in the lower-tier plans, which remains critical to strengthening the grassroots planning process. It is important for states to follow the committee's advice to make sure that money is distributed correctly within each state, with 80% going to Gram Panchayats, 10% to Block Panchayats, and 10% to District Panchayats, as this distribution will help ensure that there are enough funds to carry out the plans made at each level. Other critical observations about the functioning of panchayats by the Committee include an alarming development that "in many areas Gram Sabha meetings are becoming ceremonial in nature and public participation has declined considerably." The Committee emphasised that the Gram Sabha is the foundation of participatory democracy, designed to ensure transparency, accountability, and direct citizen participation in local governance, and warned that the weakening of Gram Sabhas would negatively impact the spirit of democratic decentralisation as outlined in the Constitution. As people elect their representatives to the three tiers of panchayats, it is important to build awareness among the electors, in addition to the elected representatives, about the powers and functions of the panchayat bodies. This knowledge will enable them to advocate for regular Gram Sabha meetings, ensuring that these meetings are truly participatory and inclusive, which will make the planning process and the review of plan implementation transparent. Ironically, few people are aware of the powers and functions of the panchayats; instead, most view them merely as facilitators for distributing benefits under various central and state-sponsored schemes by compiling lists of beneficiaries. The Committee found that while successive Central Finance Commissions have considerably strengthened the finances of rural local bodies through grants, panchayats continue to depend predominantly upon such transfers, and their capacity to mobilise their source revenues remains limited. Persistence of such a situation is baffling, as Article 243H of the constitution empowers state legislatures to authorise panchayats to levy, collect and appropriate taxes, duties, tolls and fees and also provides for grants-in-aid and constitution of panchayat funds. The Committee's observation that excessive dependence on external grants adversely affects the autonomy, sustainability, and effectiveness of panchayati raj institutions, while also constraining their ability to function as self-governing entities as envisaged under the constitution, highlights the vicious cycle in which PRIs are trapped: inadequate own-source revenue compels them to rely on external grants, and this dependence, in turn, undermines the very autonomy needed to strengthen their fiscal bases. The Ministry of Panchyayati Raj implementing the committee's recommendation of formulating a comprehensive strategy for strengthening the own-source revenues of panchayats, encouraging innovative mechanisms for local resource mobilisation and pursuing with states the timely constitution of State Finance Commissions and effective implementation of their recommendations so as to promote fiscal decentralisation and financial sustainability of PRIs will be able to bring about a transformative change only when the states are willing to strengthen the PRIs. Strengthening training programmes to build the capacity of elected representatives is essential for articulating the needs of PRIs and petitioning state governments to empower panchayats to increase their own-source revenue collection. Without the fiscal autonomy of panchayats, strengthening democracy at the grassroots will remain a mere aspirational dream, never a lived reality.